Milei’s fiscal shock has changed Argentina’s destiny

[SlowWalker]

I dont know a single country right now that doesnt have inflation and rising supermarket prices. The effects of covid inflation are still being felt.

And regarding Argentina under the last govs the inflation was literally out of control (200% per year or something crazy) so even now thats its down a lot the effects of that are still being felt which is why its so important to not let it ever get out of control. But at the end of the day every single currency in the world is depreciating and losing value every day so prices will only ever increase over time.

Agree. Yes things have gotten more expensive, but for most things, or a domestic version of it, they are the same or cheaper here than abroad.
Fresh produce, vegetables, and meat is still cheaper here than in Canada.

 

[paulo]

I was surprised to see this triumphalist new analysis by ASCOA, a think tank based on plush Park Avenue in NYC - here in their newsletter:

Argentina Week in New York, A Florida Summit, A Colombian Vote

What do people think of their expert comments?

 

[SlowWalker]

I was surprised to see this triumphalist new analysis by ASCOA, a think tank based on plush Park Avenue in NYC - here in their newsletter:

Argentina Week in New York, A Florida Summit, A Colombian Vote

What do people think of their expert comments?

If you are referring to the contents of the Message from the CEO, I would agree with her.

The country is open for business and people are doing it.

I think the squeaky wheel gets the grease, so you hear from the loudest voice in the news but often that is not representative of the population. I also think this forum is focused on BA, which is the title of the forum so that is no surprise. But the capital is just 7% of the population, BA province included is about 30-35%. The rest of the country is 65-70% of the population and often you don't hear as much about it in the main news sources.
My experience in the interior is vastly different than a lot of what I read here and other sources from BA.

There is growth, expansion, new businesses. I am seeing more mine site suited out trucks in the city. New businesses related to the industry being created. Much of which may not be visible in/from BA. Even if there are new businesses and things going on, it won't be visible unless you are part of the target audience.

 

[JMHarris]

So many Chicago School (and by extension Austrian School) ppl here. Wow! Who knew?

One thing that can help bring about lasting, broad-based economic reform is tax reform. One thing that Milei won't do is implement progressive tax reforms,such as increasing income taxes and introducing wealth or net worth taxes to reduce extreme wealth concentration. Nor will Milei do anything to truly reduce tax loopholes (reduce corporate tax loopholes). Nor will he do anything about the VAT evasion rate, the offshore evasion rate, high value fraud, and high tax complexity (a significant driver of the informal market). He has no interest in a tax regime that does not reduce tax inequality, but an alarming level of interest in a tax regime that does.

The most daring thing any Argentine government could ever do is get very serious about tax reform (including tax evasion across all socioeconomic levels). To me, real, hard, tax reform that flies in the face of culturally-accepted norms and tries to fight and change this type of corruption is probably the single-most important thing to do if you are looking to set the stage for long-term, broad-based economic reform.

It is not surprising that Argentina ranks #102 (out of 181 countries) on the Corruption Perceptions Index (CPI). Meanwhile, Uruguay is #16 and Chile is #31. Why?

 

[JMHarris]

If you are referring to the contents of the Message from the CEO, I would agree with her.

The country is open for business and people are doing it.

I think the squeaky wheel gets the grease, so you hear from the loudest voice in the news but often that is not representative of the population. I also think this forum is focused on BA, which is the title of the forum so that is no surprise. But the capital is just 7% of the population, BA province included is about 30-35%. The rest of the country is 65-70% of the population and often you don't hear as much about it in the main news sources.
My experience in the interior is vastly different than a lot of what I read here and other sources from BA.

There is growth, expansion, new businesses. I am seeing more mine site suited out trucks in the city. New businesses related to the industry being created. Much of which may not be visible in/from BA. Even if there are new businesses and things going on, it won't be visible unless you are part of the target audience.

This was an opinion piece (by the CEO of AS/COA) and should only be considered as such. Opinion pieces (and or editorials) are not fact-based or news in the traditional sense of the word.

 

[FrankPintor]

I was surprised to see this triumphalist new analysis by ASCOA, a think tank based on plush Park Avenue in NYC - here in their newsletter:

Argentina Week in New York, A Florida Summit, A Colombian Vote

What do people think of their expert comments?

An utterly unobjective gush of an article. The only question is how much this Segal person was paid?

 

[SlowWalker]

So many Chicago School (and by extension Austrian School) ppl here. Wow! Who knew?

One thing that can help bring about lasting, broad-based economic reform is tax reform. One thing that Milei won't do is implement progressive tax reforms,such as increasing income taxes and introducing wealth or net worth taxes to reduce extreme wealth concentration. Nor will Milei do anything to truly reduce tax loopholes (reduce corporate tax loopholes). Nor will he do anything about the VAT evasion rate, the offshore evasion rate, high value fraud, and high tax complexity (a significant driver of the informal market). He has no interest in a tax regime that does not reduce tax inequality, but an alarming level of interest in a tax regime that does.

The most daring thing any Argentine government could ever do is get very serious about tax reform (including tax evasion across all socioeconomic levels). To me, real, hard, tax reform that flies in the face of culturally-accepted norms and tries to fight and change this type of corruption is probably the single-most important thing to do if you are looking to set the stage for long-term, broad-based economic reform.

It is not surprising that Argentina ranks #102 (out of 181 countries) on the Corruption Perceptions Index (CPI). Meanwhile, Uruguay is #16 and Chile is #31. Why?

1) I don't think its necessarily Chicago School or Austrian economics if the idea is about not running a deficit (printing money).
Having low stable inflation is healthy and acceptable. The issue is you need to prove that you are responsible in managing the budget and can continue to pay financing costs and borrow within reason. Unfortunately, due to the history of the country, they don't have this reputation. So in order to gain it back, they need to run a balanced/fiscal surplus in the mean time.


2) I'm not really sure what you are basing all your ideas that he is again all these things or not willing to work on them.
I do agree that tax reform is the remaining piece, and they have identified that. Labour and tax reform are the main pieces of legislation they were working on to get passed.
Tax reform is larger and more difficult because of the various levels involved (municipal, provincial and federal). For it to be effective it needs to involve all levels.

With regards to points you have raised:
1) They don't need to increase the progressive rates as the plan is to get the informal economy legal, and then you have a larger tax base. Granted many will be at the lower end.
2) There already is an asset tax, and they have lowered it. The level where this begins is possibly lower than what you might be aware of.
3) I am not sure what corporate loopholes there are that are of great significance. I think all the larger companies are registered and go by the book. The issue is likely the smaller businesses. But in terms of absolute dollars they likely make up a far smaller portion of the economy.
4) I am not sure what VAT evasion rate there is. Monotributos don't need to charge VAT and its not charged on exported goods.
5) They already updated the fine for late submissions of the monthly statements by monotributos from around 200 and 400 pesos, to 220,000 and 440,000 pesos. (They weren't index to inflation in the law if I understood the issue).
6) They have had multiple allowances for declaring "under the mattress" dollars, and their fiscal innocence bill. They are trying to get people to bring their money back into the system so it can then be invested or spent at which point its taxed and generates economic activity.

What he and Caputo have mentioned is trying to make the entire the formal economy is their goal. And by doing so you can actually lower the tax rates, since your tax base is larger. There needs to be structural adjustments to transfer tax burdens from Gross Sales to only income. Property owns need to start paying a realistic property tax. Throwing the entire burden of taxes on the businesses isn't healthy. Since those taxes are provincial for the most part, the tax reform requires cooperation from all levels of government.

I am not sure where you get the idea he is opposed to all these measures, when they are actively working against most of those and repeatedly stating some of their objectives.

 

[JMHarris]

1) I don't think its necessarily Chicago School or Austrian economics if the idea is about not running a deficit (printing money).
Having low stable inflation is healthy and acceptable. The issue is you need to prove that you are responsible in managing the budget and can continue to pay financing costs and borrow within reason. Unfortunately, due to the history of the country, they don't have this reputation. So in order to gain it back, they need to run a balanced/fiscal surplus in the mean time.


2) I'm not really sure what you are basing all your ideas that he is again all these things or not willing to work on them.
I do agree that tax reform is the remaining piece, and they have identified that. Labour and tax reform are the main pieces of legislation they were working on to get passed.
Tax reform is larger and more difficult because of the various levels involved (municipal, provincial and federal). For it to be effective it needs to involve all levels.

With regards to points you have raised:
1) They don't need to increase the progressive rates as the plan is to get the informal economy legal, and then you have a larger tax base. Granted many will be at the lower end.
2) There already is an asset tax, and they have lowered it. The level where this begins is possibly lower than what you might be aware of.
3) I am not sure what corporate loopholes there are that are of great significance. I think all the larger companies are registered and go by the book. The issue is likely the smaller businesses. But in terms of absolute dollars they likely make up a far smaller portion of the economy.
4) I am not sure what VAT evasion rate there is. Monotributos don't need to charge VAT and its not charged on exported goods.
5) They already updated the fine for late submissions of the monthly statements by monotributos from around 200 and 400 pesos, to 220,000 and 440,000 pesos. (They weren't index to inflation in the law if I understood the issue).
6) They have had multiple allowances for declaring "under the mattress" dollars, and their fiscal innocence bill. They are trying to get people to bring their money back into the system so it can then be invested or spent at which point its taxed and generates economic activity.

What he and Caputo have mentioned is trying to make the entire the formal economy is their goal. And by doing so you can actually lower the tax rates, since your tax base is larger. There needs to be structural adjustments to transfer tax burdens from Gross Sales to only income. Property owns need to start paying a realistic property tax. Throwing the entire burden of taxes on the businesses isn't healthy. Since those taxes are provincial for the most part, the tax reform requires cooperation from all levels of government.

I am not sure where you get the idea he is opposed to all these measures, when they are actively working against most of those and repeatedly stating some of their objectives.

Would you be Thatcherite by chance? Also, they lowered the asset tax?????? Lowered it????? That is so very helpful for the payasos, but no one else. Also, when companies don't go by the book, that is VAT evasion, among other things. Finally, it is clear that you do not believe that economic reform that includes (even some) redistribution of wealth is important for the long-term health of any country, including Argentina.

Milei & Co. are only interested in the concentration of wealth for the upper 1%. Also, Milei & Co are just as interested in pocketing as much as they can from the nation's treasury as all previous governments in recent memory. Milei & Co have not proven the are responsible in managing the nation's budget.

Milei is selling a bill of goods. Thatcher sold a bill of goods. Reagan sold a bill of goods. Trump is selling a bill of goods. And there are always buyers!

 

[JMHarris]

One last word and then I'm moving on.

It doesn't help Milei & Co's reputation as being serious about economic reform when they call half the country names. Calling me names does not invite me in. Calling me names alienates me. Calling me names will not convince me that you are really interested in doing anything that benefits me, my community, and the country at large.

Clearly, if Milei and Co calls me casta, kuka, zurda, etc., how does he expect me to think he wants to do anything positive for me? Why should I be willing to buy-in to real, structural, deep economic reform if I'm not invited to to the table?

Milei and Co's rhetoric makes it clear that they are all about revenge and pay back and punishment and lining their own pockets, which if I understand correctly, are not part of the Chicago and Austrian schools of thought.

 

[SlowWalker]

Would you be Thatcherite by chance? Also, they lowered the asset tax?????? Lowered it????? That is so very helpful for the payasos, but no one else. Also, when companies don't go by the book, that is VAT evasion, among other things. Finally, it is clear that you do not believe that economic reform that includes (even some) redistribution of wealth is important for the long-term health of any country, including Argentina.

Milei & Co. are only interested in the concentration of wealth for the upper 1%. Also, Milei & Co are just as interested in pocketing as much as they can from the nation's treasury as all previous governments in recent memory. Milei & Co have not proven the are responsible in managing the nation's budget.

Milei is selling a bill of goods. Thatcher sold a bill of goods. Reagan sold a bill of goods. Trump is selling a bill of goods. And there are always buyers!

1) No, I am not a Thatcherite.
2) Yes they lowered the asset tax. Are you familiar with it and at what level it kicked in at? This wasn't a tax on multimillionaires, hundred millionaires and billionaires. So paying 1-1.75% on assets is quite a bit. Particularly when you will be paying income tax on interest earned, and capital gains on gains. But your car, your house, etc all those get taxed. I have already stated that there needs to be a major tax reform, across all levels of government and include a real property tax. But I don't really support the asset tax unless it is applied to individuals at a high enough threshold.

It is also not effective when Argentinians either leave the country, or redomicile in Uruguay and then operate from there so they don't end up paying it.

They have had this tax for how many years, and what is the current state of things? Not so effective. There are studies that have looked into wealth/asset taxes globally and you can feel free to study them if you wish. If they are to apply them, then do it correctly in a meaningful not counterproductive way.

3) Again, What companies are evading VAT? All the large companies are paying it. If smaller individuals want to keep to sets of books then that is the individual make a decision and I disagree with it. But I believe this is more of an issue on the smaller scale monotributo level, and they do not need to pay VAT. VAT is only charged by SAS, SRL and SA companies not monotributos.
I have stated that they need to get rid of the informal economy and everything has to be in the formal economy. This is literally what they are trying to do, and they have increased the fines for even delayed submissions to realistic penalties now. People complaining about services and budget cuts while at the same time not wanting to contribute taxes is a obviously a problem.

4) As I have already stated, they have had wealth distribution already for how long and what has been the result of it? I don't think wealth distribution right now is going to help for aforementioned reasons. What they need are policies to reduce bureaucracy and enable the economy to grow. The starting/reference point here is not necessarily the same as in other countries given both the history and actual scenarios. Also, they need an affordable credit market which has only restarted last year.

5) I am not sure how you suggest they are protecting the 1%, while at the same time they are trying to remove the protectionist policies that would hurt the monopoly and cartel like behaviors of the Argentine industrialists. Why would they be doing that?

6) What do you mean they haven't proven to responsible management of the federal budget? They implemented austerity measures and are running a fiscal surplus. What previous administration has done this, or what other countries?

One last word and then I'm moving on.

It doesn't help Milei & Co's reputation as being serious about economic reform when they call half the country names. Calling me names does not invite me in. Calling me names alienates me. Calling me names will not convince me that you are really interested in doing anything that benefits me, my community, and the country at large.

Clearly, if Milei and Co calls me casta, kuka, zurda, etc., how does he expect me to think he wants to do anything positive for me? Why should I be willing to buy-in to real, structural, deep economic reform if I'm not invited to to the table?

Milei and Co's rhetoric makes it clear that they are all about revenge and pay back and punishment and lining their own pockets, which if I understand correctly, are not part of the Chicago and Austrian schools of thought.

1) Always interesting to see people say they want to make a point and move on without offering the counter party a chance to respond.

2) I have criticised him for this behaviour/rhetoric. I agree it offers no benefits. Unfortunately we are seeing this as more of the norm as the state of politics in parts of the world these days as politics has become more polarized than ever.

3) However, it is interesting that you were trying to call me a Thatcherite and imply my beliefs and I may have read your message as if it included an undertone. You were trying to attack the person not ideas. So I would suggest you heed your own advice and try to remain calmer and keep to the discussion.

4) He thinks he is doing things right by the country and for the betterment of the citizenry. This obviously falls along philosophical boundaries. The benefits are not split based on what party you voted for. I agree he shouldn't be calling name as I've stated. But I think the left is also guilty calling names to the right, and of not really trying to think about the plans, or observe benefits. I have seen clear reduction in inflation and a steadied exchange rate, floating within bands without government involvement in trying to maintain the peso (except around the election time) and I see people around here are generally more hopeful for the future. Therefore, listening to people on the left suggest that there has been no reduction in inflation and everything else accomplished is non-sense.

5) Whether you want to buy-in or not is up to you. Enough of the population voted to support him, or elect other parties that are in general agreement and supportive of the policies. You may want to take a pause and really try and think about how all the policies are actually working, and what they are trying to achieve and see if you agree. Of course, this needs to be done with a blank slate, and putting party affiliation to the side. It shouldn't be done with bias.

As a private citizen I am not sure what personal involvement "at the table" you expect. Typically, citizenry may communicate with their representative etc, but it is the elected officials and bureaucrats that design, write, and pass bills/laws.

6) Again, I think his communication is poor towards the part of the country that didn't vote for him. But the other points are so far just accusations. I don't know the history of Argentinian politicians, but have there not been corrupt ones on the left? Are there not corrupt ones in every country. I am not supporting it, but I suppose the point is, even if they are corrupt, will benefits still be shared with society? (Yes billionaires will always benefit, but if the economy is good and growing for everyone else also, that is also good).